October 26, 2018 / 11:17 AM / a year ago

LIVE MARKETS-The worst month since 2011?

Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Helen Reid. Reach her on Messenger to share your thoughts
on market moves: helen.reid.thomsonreuters.com@reuters.net  
    THE WORST MONTH SINCE 2011? (1113 GMT) 
    Just a short while ago, European shares were set for their worst month since August 2015,
now it's looking more like August 2011. We're currently down 8.7 percent on the month, Aug 2015
saw an 8.4 percent fall, and Aug 2011 was a 10.5 percent drawdown.
    In the grander scheme of things there's only been 14 months as bad as October 2018 (so far)
in the last 30 years - as you can see below in the monthly chart. 
    Which means we're in the top 4 percent as far as bad months go!
    (Julien Ponthus) 
    Roughly 90 percent of the STOXX 600 is in negative territory but that hasn't spoiled Danish
cannabis firm StenoCare's stock market debut.
    Its shares have more than tripled in value this morning, worth remembering next time a
company decides to cancel an IPO and lamely blames it on "adverse market conditions".
    It's been said for a while now that cannabis could be the  new blockchain in terms of
stoking a market frenzy and it seems the craze is spreading. 
    Pot stocks are hot and not only in Canada, which just became the first Group of Seven nation
to legalize recreational cannabis.
    We've already used this illustration (taken from the twitter account of GAM fund manager
Paul McNamaraon) but hey, a second time can't hurt:      
    Pot is hot! Shares in Danish cannabis firm StenoCare surge on debut
    LIVE MARKETS-Is cannabis the new blockchain? nL8N1WS4AE]
    (Julien Ponthus and Ritvik Carvalho) 
    The STOXX is set for its worst month since Aug 2015 as it sinks down 1.1 percent this
morning in a broad selloff after results misses from Amazon and Alphabet renewed anxiety about
how fragile this tech-fuelled bull market might turn out to be.
    Results-wise it's a triptych of terror for European investors: So far three main negative
trends have emerged from company results: higher raw material and wage costs, the impact of
tariffs, and a slowdown in China. 
    No surprises then that analysts are downgrading their MSCI Europe earning estimates at the
fastest pace since Feb 2016, according to Refinitiv IBES data. 
    Car parts maker Valeo follows in the footsteps of auto peers with a warning on tougher
European emissions rules and slowing China sales - driving its shares down 17 percent while peer
Faurecia falls 6.9 percent.
    Spanish paper and packaging maker Viscofan has only just started trading and plunged as much
as 22.5 percent after warning it would miss its full-year guidance.
    (Helen Reid)
    It looked set to be a day of heavy losses for equity investors with European futures down
sharply – 0.6 to 0.9 percent - after U.S. futures tumbled following results from Amazon and
Alphabet– prompting renewed concerns about the dominance of tech in this market cycle. 
    Car parts maker Valeo could be the biggest faller of the day, indicated down 10 to 15
percent after its results missed estimates by 22 percent and it slashed guidance for next year
by 11 percent. The warnings echoed Daimler’s and others in the auto sector flagging disruption
from tougher European emissions tests and slower sales in China, and the sector could be bruised
as a result.
    Stronger results from British Airways owner IAG could help the travel & leisure sector which
has been under pressure with airlines warning of fuel costs rising. 
    With some analysts citing a report Brexit talks are in deadlock, Britain’s FTSE 100 will be
a focus although sterling was unchanged on the day. Lender RBS said it had taken a 100 million
pound impairment provision to account for greater economic uncertainty, the first concrete sign
Brexit is clouding the outlook for banks. 
    Investors will also be digesting the impact on healthcare companies, including Roche and
Novartis, of Trump's plan announced overnight to create a global pricing index for prescription
drugs based on lower prices paid in other countries.
    Of the Europe-listed pharma names, Roche, Ipsen, Grifols and UCB have the biggest exposure
to the U.S. Medicare Part B according to Goldman Sachs. One trading desk saw Roche falling 2
percent on the news.
    (Helen Reid)
    Futures have opened sharply lower, suggesting it's going to be a pretty heavy fall for
European stocks after U.S. stock futures tumbled overnight on Amazon and Alphabet results.    
    A Bloomberg report that U.K. Prime Minister Theresa May’s Cabinet is not close enough to
agreeing a way forward for top level Brexit negotiations to resume is likely to add further
uncertainty to UK markets.
    (Helen Reid)
    A profit warning from French auto parts maker Valeo - its second in three months -
will underscore mounting concerns in the automotive sector about the impact of tougher European
emissions tests and slowing sales growth in top market China.    
    Ryanair may get a lift after signing a preliminary contract deal with Belgian cabin crew and
pilots as the budget airline aims to avert further strikes that have grounded planes and
disrupted travel for thousands of customers. 
    Brace for action in the construction sector after LafargeHolcim, the world's largest cement
maker, became the latest building materials company to warn of higher costs. The company
reported consenus-busting Q3 earnings, but lowered its profit expectations due to rising fuel
and raw materials costs.
    Last week German rival HeidelbergCement trimmed its profit guidance, sending its shares down
as much as 10 percent to a near four-year low.
    In the chemicals sector, BASF posted slightly lower-than-expected quarterly profits and
reiterated its full year guidance.  
    Aside from the onslaught of earnings, there is some IPO activity with shares in Danish
cannabis oil firm StenoCare debuting, aiming to take advantage of a recent surge in investor
interest in a substance that is still banned or restricted in many markets.
    Spanish bank Ibercaja has been in touch with advisers on a potential IPO, sources said, part
of a legal requirement to protect the financial health of Spanish savings banks.
    Volvo Cars Q3 income falls due to launch costs, higher tariffs                 
    Spain's Caixabank Q3 net profit down 27.6 pct due to Repsol sale               
    Asset manager Amundi reports higher Q3 profits                          
    Signify beats expectations with 8 pct rise in Q3 core profit                   
    UBS CEO Ermotti won't rule out M&A, says options are limited                   
    Volkswagen deals ready truck business Traton for stock market listing 
    Brewer Ambev squeezed by Brazil competition, Argentina inflation
    AIG receives UK approval for Brexit restructure
    Freenet open to offers for its $1 bln stake in Sunrise - CEO
    NordLB stake sale sparks merger talks among German public sector banks - sources

    Lufthansa eyes divestments of non-core businesses - handelsblatt newspaper
    (Josephine Mason)
    Any hope of a sustained recovery after yesterday's modest recovery across European markets
will be dashed, with the market's facing further pressure at the open today, taking their lead
from Asian and U.S. markets overnight.
    FTSE 100 is expected to open 64 points lower at 6,940, DAX is expected to open 117 points
down at 11,190 and CAC 40 is expected to open 62 points lower at 4,970, according to David
Madden, market analyst at CMC Markets UK.

(Josephine Mason)


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